MGT 5391 Innovation and

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• MGT 5391 Innovation and
• Entrepreneurship

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Group Work on Innovation

• Break into your Teams
• Answer the following 6 Questions
• What is Innovation?
• Define Innovation?
• Who is responsible/accountable for innovation?
• Where is it in the Open Systems Model?
• What dimensions of the Internal Business
• Environment and Transformation System
• effect innovation?
• Report back to class

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What is Innovation?
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Innovation
. . . . is any idea, practice, process, or
material artifact perceived to be new by the
unit or firm of adoption (adopted from Zaltman,
1973)
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Two Stages of Innovation

• 1. Initiation Stage
• Knowledge Awareness
• Attitudes formation (re the
• innovation)
• Decision/Choice to implement or
• not.

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Two Stages of Innovation

• 2. Implementation Stage
• Initial Trail Implementation
• Continued sustained
• Implementation

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• Barriers to Innovation
• Complexity
• Formalization
• Centralization
• Others?

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• Definition Both a -----
• KPI/Outcome/Result
• and a
• Internal Process (Internal Business
• Environment and Transformation
• elements)

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Our Focus for Innovation An Internal Process
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Organizational Innovation 1

• Internal Business Environment Elements
• Culture
• Core Competencies linked to
• improved Core Capabilities
• Business Model
• Vision Direction (VDSP) Dimensions
• Strategies Corporate Business
• Mutuality Key Suppliers and
• Customers plus Employees and
• Unions (if present)

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Organizational Innovation 2

• Transformation Elements
• Organizational Structures
• Shared Leadership and Decision
• Making
• Other Transformation Elements
• (NOT for Analysis)

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Innovation Results in Increased Value to

• Customers (Stores/
• Distributors/Dealers
• End Users)
• Product/Service Quality
• Speed to Marketplace

Value Proposition
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Successful Entrepreneurship and Organizational
Innovation
The key to success with entrepreneurship and
innovation is moving from the invention of ideas
to effective commercialization and acceptance in
the marketplace
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Innovation and Competitive Advantage
Difficult for competitors to imitate
Commercially exploitable with increased
capabilities
Competitive Advantage
Provides significant value to customers
Timely/Speed
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Fostering Entrepreneurial Innovation
Three approaches
Create the Capabilities For it!

• Internal Corporate Business Core
• Competencies

• Cooperating to Produce Innovation

• Acquiring Innovative Capability

_____ Organization, Commercial, Technological,
and Team/Individual
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Internal Corporate/Business Core Competencies
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Internal Corporate/Business Core Competencies
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Cooperating to Produce Innovation
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Acquiring Innovative Capability
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Appropriating Value from Innovation

• Barriers to Integration
• Different Time
• Orientation
• Interpersonal
• Orientation
• Different Goal
• Orientation
• Formality of
• Structure(s)

Time to Market
Cross- Functional Integration/ Value Chain Teams
Product/ Service Quality

• Facilitators of
• Integration
• Shared Core Values
• Leaders Vision
• Direction
• Resource Allocation
• Effective Open
• Communication

Creation of Customer Value
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Organizational Innovation - 1
Innovation
    Organizational disequilibrium will continue
to increase.   The rapid diffusion of new
technologies will push companies and industries
headfirst into an economy in which factors
such as increasing returns, network
effects, risk management, and ethical questions
continue to create disruptions. Although
the downturn has temporarily slowed this surge,
it would be a mistake to underestimate its
eventual effects. Highly adapted organizational
cultures are now more often seen as
liabilities than as assets, as more swift and
agile players gain significant advantages
in a culture of innovation. Economies of scale
may be replaced by economies of structure
innovative organizational strategies that
lead to more adaptive marketplace behaviorsas
the primary competitive advantage.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
22
Organizational Innovation - 2
Innovation
Executive readiness will outperform deliberate
planning processes.   In a culture of innovation
and uncertainty, effective performance of leaders
will increasingly depend on building new
intuition rapidly through action and
experimentation. Organizations and executives
must build a new capacity for quick learning and
decision-making to replace the slow processes now
prevalent in large companies.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
23
Organizational Innovation - 3
Innovation
Innovation will challenge organizational cultures
built around core competencies.   Survival in an
uncertain business environment will require the
courage to choose innovative pathways and the
ability to relinquish comfortable, but outdated
mindsets and practices. Those companies and
workers unwilling or unable to give up old
mindsets and behaviors will find themselves at a
disadvantage. Companies will need to be on the
alert for competency addiction throughout the
organization.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
24
Organizational Innovation - 4
Innovation
Innovation will require new organizational
structuresand new measures of accountability for
innovators.   Large companies with many
institutionalized structures are finding the
innovation imperative extremely challenging. Our
early research suggests that innovation in big
companies is best nurtured by cultivating
supportive environments that provide a living
system in which innovation can thrive, rather
than micromanaging innovation efforts. To do
this, companies need to balance the discipline of
product development (exploiting new ideas) with
the creation of process innovations (exploring
new approaches). Internal venture capital
processes, autonomous RD labs, and creating
small business units can help shield innovations
from the intense scrutiny of the dominant company
culture, but balancing with product development
disciplines will be key. So will creating social
and physical environments that increase the
likelihood of collisions between people with
different skills and perspectives.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
25
Organizational Innovation - 5
Innovation
Changing social networks will be key drivers in
new organizational behaviors.   Social networks
are becoming more complex. They are increasingly
small-world networkswith a large local web
that is connected to very far away or different
dimension networks by soda-straw links. These
links seem weak, yet open up whole new worlds.
Companies will need to understand and adapt to
these increasingly complex and powerful networks
among both their employees and their customers,
as well as among suppliers and other stakeholders
such as unions and stockholders.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
26
Organizational Innovation - 6
The Workforce
Employee networks are becoming increasingly
important corporate resources.   Trust, loyalty,
culture, and continuity are critical to the
success of knowledge-based organizations. While
organizations may choose to hire temporary
workers, outsource work, and use contractors to
cope with disequilibrium, they will be most
successful if they leverage long-term networks of
employees, past and present. People and their
knowledge networks are core resources that
require investment. Organizations that can become
more networked by investing in their employees
networks will have an advantage.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
27
Organizational Innovation - 7
The Workforce
Workers are shifting their attention from
lifetime employment to lifetime networks.   The
lifetime employment model is rapidly receding,
the consequence of (1) industry labor policies
favoring temporary, flexible work arrangements
(2) a shift toward knowledge-based work and (3)
the mind-shift, particularly among younger
workers, toward being free agents. The constant
drive for innovation to respond to customer needs
and rising competition from all sides also
requires a fast, flexible, and adaptable
organization. Flexible organizations demand
flexible workers and flexible hiring policies.
To achieve this flexibility and innovation,
companies will need the ability to tap into broad
networks of employees and contacts quickly. While
an employee may no longer stay with the company
for a lifetime of employment, creating and
maintaining lifetime networks will be critical,
both for the employee and for the company.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
28
Organizational Innovation - 8
The Workforce
Repatriation of former employees will become an
important hiringand innovationstrategy.   Compan
ies will need to look for opportunities to rehire
their own alumni. These opportunities should be
especially rich in the near term, given todays
environment. Some employees who left for
adventures in the dot-com world are looking to
come back at a different stage in their lives and
can now infuse new ideas into their old
companies. A lifetime network model of
employment means that if companies can stay in
the networks of alumni in a positive way, they
may be able to rehireat short noticeworkers
with relevant skills who need much less training
than a brand new hire.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
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Organizational Innovation - 9
The Workforce
Organizations will increasingly tap into the
flows of information in lifetime
networks.   Moving to a lifetime network model
of employment can enable companies to create
greater flexibility. Another benefit of this
model is increased innovationmaximizing the flow
of new ideas through the company. Innovations
tend to arise from combinations of ideas from
diverse fields. Companies should actively attempt
to make the most of the wide range of information
flowing through the networks of a loose
confederation of current and former employees and
contacts.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
30
Organizational Innovation - 10
The Workforce
More generations in the workforce will create
both challenges and opportunities for
organizations.   Companies will need to be
increasingly sensitive to the generational mix
of employees. As innovation becomes the main
source of productivity, companies will learn
that a certain generational mix is a critical
component of optimal diversity. Teams of
knowledge workers already include an
unprecedented cross-generational mix. Over the
next 10 to 20 years, many large and small
businesses will have four, sometimes even
five, generations in the workplace. Knowledge
workers from each generation bring different
formative life, technology, early work, and
educational experiences to the workplace.
Organizations will need to be sensitive to these
differencesparticularly differences in
communication styles and the meaning of
workto help each generation maximize its
contribution to the organization while
facilitating communication and collaboration
among cross-generational teams.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
31
Organizational Innovation - 11
The Workforce
The work environment will become increasingly
tailored to individual workers/teams.   Todays
new consumers are also new workers, demanding
more personalized compensation and motivation
incentives as well as lifelong learning and
growth. Different workers also require different
training methods and thrive in different work
environments. To keep people in their networks,
companies will need to develop strategies for
responding and adapting to their individual needs
on an ongoing basiswhether they are employees
or alumni.
Figure 19 Percent of U.S. workers who work in
alternative work environments.
 
20
15
10
5
0
Source Bureau of Labor Statistics.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
32
Organizational Innovation - 12
The Workforce
Organized labor must evolve to meet the needs of
networked organizations.   Networked
organizations demand flexibility and just-in-time
resources, rewarding sophisticated workers who
prefer to have more control over their
professional destiny. To meet these demands,
the role of labor organizations must be
transformed. It must extend beyond an employees
commitment to a particular unionized firm to
represent the individual workers interest as he
or she moves to different companies, fills
different positions, and takes on different
projects. For todays independent workers, labor
organizations might replace employers in some
important ways. They could provide access to
portable health benefits and retirement plans
that workers can take with them as they move
among projects with different companies. They
could offer skills certification, ongoing job
training, and professional development. For
employers, they could guarantee access to a
diverse pool of qualified workers. And they could
negotiate standards in areas such as contracts,
transactions, and intellectual property issues.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
33
Organizational Innovation - 13
The Workforce
New workplace learning strategies will focus on
individualized/team talent support.   The new
learning paradigm is lifelong and continual,
on-the-job and action-oriented, deploying
different media at different phases of learning
with an emphasis on reflection time. Industrial
Era education primarily involved the transfer of
pre- digested information. That approach fails
to take into account the importance of informal
and interactive learning and has proven largely
ineffective (whether in classroom or online) for
knowledge workers. Effective 21st-century
learning blends the Agrarian Age notion of
apprenticeship with Information Age access to
just-in- time, relevant resources that are
sophisticated and adapted to the individual.
Leading edge corporate learning programs draw on
cognitive research and cultural translators to
enable seamless support of individual talent. New
learning styles are also evolving as workers
rely increasingly on Internet resources, and new
forms of evaluation need to be developed to
evaluate and validate this learning.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
34
Organizational Innovation - 14
The Workforce
Workplace skills will increasingly shape home
lifeand vice versa.   The workification of
household life is increasing. Already open 24/7,
the household is becoming a managed
organization. Women and men alike are
transferring management practices, tools, and
skills learned in the workplace to the home, and
vice versa. Traditional gender roles are no
longer the only criteria by which roles and
tasks are assigned. Contextual factors such as
technological expertise, work schedules,
communication skills, and proximity of the
workplace to home, among others, are important
for shaping who does what in the household and
how responsibilities are negotiated. Many
household management strategies come from
experiences at work, such as scheduled household
meetings, calendaring systems, and explicit role
assignments within the household (which might
include as technology manager and finance
person, for example). Working at home no longer
means performing paid work tasks, but also
includes the effort to create and maintain a
household.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
35
Organizational Innovation - 15
The Workforce
Distinctions among household tasks, paid work
tasks, and play will be defined increasingly by
individuals/teams rather than institutions.  
With increasing adoption of communications tools,
the work of the household is often conducted on
the job. Both paid job tasks and household tasks,
however, are experienced on a spectrum from
work to play, and what one person considers
work, others may consider play and vice
versa. Workers-as-householders create the
context and meanings within which they manage
the household, and even the management
metaphor, while currently common, is not
interpreted or adopted in the same way and to
the same extent by every household.
_______ Source Key Forecasts and Emerging
Trends, Institute for the Future, 2003, p. 35-39
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Types of Strategic Change

• Mergers and Acquisitions
• Re-engineering Process
• Design
• Software Development
• Installation
• Business Expansion
  
• Culture Change
  
• All

• Strategy Deployment
• Restructuring and
• Downsizing
• Technology Change
• Mixed Collection of
• Change Efforts
• TQM-driven Change

One or more reports did not state the sample size
37
Figure 1. Summary of Organizational Change Effort
Type of Strategic Change Number of
Sum of Sample Median
Studies Size
Success Rate
Strategy Deployment 3
562
58 Restructuring and Downsizing
9 4,830
46 Technology Change
5 1,406
40 Mixed Collection of Change
Efforts 1 23
39 TQM-driven Change
5
863 37 Mergers and
Acquisitions 9
395
33 Re-engineering and Process Design
7 3,442
30 Software Development and Installation
6
31,480
26 Business Expansion
1 200
20 Culture Change
3 225
19 All
49
43,426 33
One or more reports did not state the sample size
38
Time Required to Transform an Organizations
Systems, Processes, Structures and Culture
Average Number of Years for all firms
Example
Prudencial Insurance, Columbus, Oi 3 Years
Small / Medium Sized Office
1-2
Goodyear, Beaumont TX 6 Years
Large Worksite
3-5
Line Of Business
Textronics, Beaverton, Or 7 Years
4-8
SBU/ GBU
Unilever, Europeen Foods 7 Years
8-10
G.E. Only half done after 27 years Jack Welsh
Medium to Large Firm
15-20
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Figure 2. Strategy Development
Source Sample
Method Success Rate
Conference Board study (Troy, 1994)
166 US European companies
Survey about experience with organizational change
58 reported success in changing corporate
strategy
Nut, 1999
50 of decisions fail, as indicated by whether
the decision was put to use
Executives and Middle managers in 356 medium to
large organizations in the United States
and Canada
Interviews
Aspesi Vardham (1999)
40 companies that pursue sound strategies
Case studies describing strategy implementation
60 delivered excellent results, defined as top
quartile shareholder returns.
40
Figure 3.1 Restructuring and Downsizing
Source Sample
Method Success Rate
The Economist (1989) (Tomasko, 1993)
135 companies that attempted massive restructure
Not described
Less than 50 achieved significant increases in
their value relative to their competition
Cameron et al (1991) Tomasko, 1993)
30 companies in the automotive industry
4 year study
White-collar productivity improved little and
admin costs remained far above global competitors
Bennett (1991) (Tomasko, 1993)
100 actuarial companies that downsized
Survey
Improvements reported productivity (22), cash
flow (25), decision making speed (15) customer
satis- faction (10) product quality (10)Use
of technology (10) competitive advantage (19)
Firms that down-sized (sample not described)
1993 AMA survey (Mabert Schmenner, 1997)
Survey
50 increased operating profits, 36
increased worker productivity, 2.4
increased moral.
41
Figure 3.2 Restructuring and Downsizing
Source Sample
Method Success Rate
1995 AMA Survey (Mabert Schmenner, 1997)
Firms that down-sized (sample not described)
51 increased operating profits, 34
increased worker productivity, 2
increased moral.
Survey
1192 large and mid- size firms.
Survey on US workforce trends
51 reported increased share- holder value.
49 increased operating profit over the survey
period.
1999 AMA Workforce Survey (AMA, 1999)
Wall Street Journal (Laabs, 1999)
Companies that downsized (number not specified)
Not described
Only 33 of the firms had stock prices that were
at least at the average for their industries two
years after the downsizing.
Wyatt Associates (Appellbaum et al., 1999)
1,005 firms that downsized 1986-1991
Not described
46 reduced expenses, 32 increased profits, 22
improved pro- ductivity, 17 reduced bureaucracy.
Society for HR Management (Appelbaum et al., 1999)
1,468 firms that down- sized
Not described
Less than 50 reported that productivity
improved.
42
Figure 4 Technology Change
Source Sample
Method Success Rate
Survey about experience with organizational
change
20 reported success in changing info technology
Conference Board study (Troy, 1994)
166 US and European companies
The Business Research Group (Computerworld, 1994)
305 information systems managers
Survey (no details)
50 reported cost savings for new versus
replaced client/server systems
Standish Group (Williamson, 1997)
Not described
Not described
Only 10 of SAP projects are completed on time.
Conference Board and Price Waterhouse LLP
(Stedman, 1998)
50 companies
Survey
Less than 40 were successful in imple- menting
data ware- housing. Behind schedule 44..
On hold 14. Cost over- runs 20
Survey sponsored by MERIT (Dryden, 1998)
886 information Systems managers
Survey
54 of ERP applications had no outages that
caused significant revenue loss or loss of
potential customers.
43
Figure 5. Mixed Collection of Change Efforts
Source Sample
Method Success Rate
23 major international companies
Survey
Executives in 39 of the companies judged change
to be completely successful
Templeton (MCB University Press, Ltd., 1997)
44
Figure 6 TQM Driven Change
Source Sample
Method Success Rate
141 European and Japanese Companies in
automotive supply industry
Companies scored on process quality and
design quality
38 of the companies designated in top two
categories, identified as Prevention and
Perfection
McKinsey survey (Rommel et al., 1994)
Conference Board (1991) (Carr, Hard, Trahant,
1996)
133 companies trying to institute total
quality management
Satisfaction survey about TQM implementation
29 rated satisfaction with progress as high or
very high
Prabhu et al. (2000)
294 manufacturing companies in the United Kingdom
Survey of business practices and results versus
world-class standards
37 of TQM companies have achieved world- class
or potential-winner status
Huq Martin (2000)
7 hospitals attempting to Implement TQM.
Case studies that documented TQM implementation
process.
14 successfully implemented TQM based on
researchers ratings of case reports.
Casadesus Gimenez (2000)
288 Spanish companies
In-depth study, descriptive analysis, cluster
analysis.
65 of the companies obtained very high levels of
internal (e.g., management control) and
external benefits, e.g., market share)
45
Figure 7 Mergers and Acquisitions
Source Sample
Method
Success Rate
Earnings before and after merger market share
return vs. capital expense stock price
operational efficiencies
Estimates of success ranged from 25 - 33.
Mirvis Marks (1992) cite 10 studies to support
their Estimate of the success rate
Most samples not described
80 earned their cost of capital. Acquirers
averaged more than 18 per year in total
return to share-holders over 10-year period
Studied 21 companies that made 829 acquisitions.
Analysis of financial performance ranging up to
ten years.
Anslinger Copeland (1986)
Sirower (Drake Beam and Morin, 1999)
Not described
Not described
Only 30 of mergers achieved anticipated value.
KPMG report (The Economist (US), 2000)
Sample not described
Not described
Only 16 of mergers added shareholder value.
More than half destroyed shareholder value
one-third made no difference.
72 mergers in financial services industry across
19 countries.
Anderson Consulting report (Dinkin, 2000)
Analysis of financials from one year before to
two years after the merger
33 of the merger companies were designated as
MA value capturersbased on return on equity
and revenue growth.
70 said their deals fully achieved revenue and
market penetration goals but 40 failed to
realize anticipated savings
Pricewaterhouse Coopers survey (Doucet, 2000)
125 companies worldwide
Survey (details not described)
Conference Board survey (LI Business News, 2000)
HR managers in 134 companies that had a merger
since 1990.
Respondents rated their experience with mergers
since 1990.
67 consider merger to be very successful or
successful
Arthur Anderson survey (Ryan, 2000)
43 executives in 31 companies in communications,
media
Survey (detail not described)
37 without significant problems. 63 said that
MAs caused a variety of negative impacts
ACG Network study (Cheung, 2000)
Not described
Survey (detail not described)
Only 30 met expectations of architects
46
Figure 8 Re-engineering and Process Design
Source Sample
Method Success Rate
350 executives involved in business re-engineering
Interviews
16 fully satisfied with results. 68 said
that projects had unintended negative side
effects
A.D. Little survey (Caldwell, 1994)
Conference Board Study (Troy, 1994)
166 US and European companies
Survey about experience with organizational
change
27 reported success in changing
business systems/processes
Institute of Management Accountants
(Computer- World, 1994)
2,200 members of the institutes
Controllers Council
Survey (details not described)
25 said they were satisfied with their companys
re- engineering efforts.
Hall et al. (1994)
2o projects in different companies
Detailed analysis, but few details given.
Only six companies (30) achieved an average of
18 reduction in business-unit costs
Strebel (1996)
Practitioners of radical corporate reengineering
in Fortune 1000 companies. Number not given.
Not described
Success rates are well below 50 - as low as 20
in some companies
CSC Index, Inc. survey (Tenner DeToro, 1997)
600 large firms in North America and Europe.
Survey (details not described)
Companies pursuing cost reductions met their
goals. 75 of those pursuing cycle time
reductions and productivity increases achieved
their goals
Schultz Eierman (1997)
106 companies with at least 1000 employees.
Usable returns were less than 10 of initial
mailing
Mail survey
57 classified their re-engineering efforts as
successful
47
Figure 9 Software Development and Installation
Source Sample
Method Success Rate
500 information technology Project managers
Survey
Only 24 reported no major project failures.
Suquent Computer Systems, Inc. (Moad, 1998)
The Standish Group (1995) and Johnson (2000)
8380 software projects Described by 365 of
Information technology executives
1994 Survey supplemented with personal and
focus group interviews
16 are fully success- ful in terms of
time, budget and with the promised features
and functionalities
The Standish Group (Johnson, 2000)
Approximately 7500 soft- ware projects
Survey in 1996
27 are fully success- ful in terms of
time, budget and with the promised features
and functionalities
26 are fully successful in terms of time,
budget and with the promised features
and Functionalities.
The Standish Group (Johnson, 2000)
Approximately 7500 software projects
Survey in 1998
The Standish Group (Johnson, 2000)
Survey in 2000
28 are fully success- ful in terms of
time, budget and with the promised features and
functionalities
Approximately 7500 software projects
Only 33 can be classified as success in terms of
value creation, cost-effective- ness, tangible
financial impact, and goal attainment.
Boston Consulting Group (Booker, 2000 Hayes,
2000)
100 users of enterprise software projects
over previous three years
Interviews
48
Figure 10 Business Expansion
Source Sample
Method Success Rate
Worldwide sample of 200 pharmaceutical companies
Survey about drug discovery, development, and
production practices
20 were identified as most innovative based
on product introductions and sales
Puhlman, Gouy
Figure 11 Cultural Change
Source Sample
Method Success Rate
166 US European companies
Survey about experience with organizational change
33 reported success in changing vision, values,
and culture
Conference Board study (Troy, 1994)
Study not described
Study not described
Only 10 of corporation that attempted to
change management styles were successful
in institutionalizing the new style
Bennis (Carr, Hard, Trahant, 1996)
Smith Mourier (2000)
59 North American managers who described a
culture change
Survey about the factors affecting the success
of organizational change
19 of the culture change efforts were rated
among the top quartile of successful organizationa
l change efforts
49
Figure 12 Success Rates Over Time
Success
50
Figure 13 Success Rates by Type of Measure
Ratings (n11) Project (n 13) Operations (n
13) Management (n 4) Customer (n
2) Enterprise (n 16) Owner (n 7)
0 10 20
30 40 50
51
Figure 14. Sample Measures of Organization Change
Category Sample Measures
Ratings of Overall Success
Satisfaction with change, stakeholder
expectations met
Implementation scored against world-class
standards, project completed on time, on budget,
with promised features unanticipated negative
consequences.
Project Management
Operations Performance
Cost reduction, cycle time reduction,
productivity gain, product/service quality, rate
of product introductions, rate of technology
deployment, employee morale improvement.
Control, speed of decision-making, reduced layers
of bureaucracy
Management Behavior
Customer satisfaction, sales
Customer
Enterprise Performance
Earnings, ROE, revenue growth/loss, operating
profit, market share/penetration, competitive
edge, customer loss, cash flow, stock price.
Shareholder value (dividends plus stock
appreciation)
Owner
52
Figure 1. Summary of Organizational Change Effort
Type of Strategic Change Number of
Sum of Sample Median
Studies Size
Success Rate
Strategy Deployment
3 562
58 Restructuring and Downsizing
9 4,830
46 Technology Change
5 1,406
40 Mixed Collection of Change
Efforts 1 23
39 TQM-driven Change
5
863 37 Mergers and
Acquisitions 9
395
33 Re-engineering and Process Design
7 3,442
30 Software Development and Installation
6
31,480
26 Business Expansion
1 200
20 Culture Change
3 225
19 All
49
43,426 33
One or more reports did not state the sample size
53
Organizational Innovation A Combined and
Integrated Strategy Works Best
How to Improve Performance? Solid research
evidence shows that workforce productivity and
organizational effectiveness can be increased at
least 30 to 40 percent with a different work
management paradigmcalled a High Performance
Organization. The research, conducted by Barry
Macy at the Texas Center for Innovative
Organizations, Texas Tech University, was based
on analyses that started with roughly 1900
organizational performance improvement studies
conducted between 1961 and 1991. Macy
identified a list of sixty-one action levers,
defined to include technologies, equipment,
organizational structure changes, quantity
processes, and human resource practices, that
are related to organizational performance. Total
Quality Management is an example of the levers on
the list. Gain sharing is another. The big
increases in performance are realized when
several of the action-levers are used as an
integrated improvement strategy. One of the
problems is and has been that organizations have
jumped on the bandwagon for one of the levers,
treated as a fad, and focused on it in isolation.
That helps to explain the failure of TQM and
reengineering and business/work process redesign.
In combination, the action-levers are elements
of a work paradigm that is very different from
the traditional work management model. For
example, Quality Management would have been a
more powerful lever if it had been connected with
a supportive reward system. Macys research
confirms what is intuitively apparent the
problem is complicated, but the potential for
improvement easily justifies a commitment to
change the way work and business processes are
organized.
Source Adopted from H. Risher (Ed.), Aligning
Pay and Results, American Management Association,
1999, p. 15, 303-304.
54
Organizational Innovation A Combined and
Integrated Strategy Works Best
Raising the Bar of Performance It seems at times
that every organization is trying to raise the
bar of performance. They are performing at one
level and would like to raise the bar to a higher
level. New technologies, systems, structures,
and processes are in some cases required to reach
the new level, but at its core this is a people
management problem. The increases in performance
that Barry Macy found in his research 30 to 40
percent (see Chapter 1, p. 15) are attributable
to a new organizational paradigm that enables
people and their organization to perform at
higher levels. Finding ways to raise the bar
can be a decided competitive advantage. Pay by
itself is not going to accomplish this. If work
and business processes, systems, and structures,
are unchanged, a new reward system, such as a
group incentive plan, may well generate better
results, but its likely to be limited. In the
past that was a common strategy. Employees will
work somewhat harder for at least some period of
time, but the big increases in performance are
not attributable to speed or work effort.
Working harder (i.e, increased effort) will not
generate 30 40 percent increase in performance.
Furthermore, if the work unit has a history of
poor employer-employee relations or simply poor
management, it is unlikely that the employees
will jump on the bandwagon simply because a new
carrot is dangled in front of them. They may
also lack the knowledge or skills to adapt their
behavior to new work and business processes.
They could also have Inadequate equipment or
resources available. To reiterate, Barry Macy
identified a list of some sixty-one
Action-levers that have been shown to affect
financial results over a 30-year period. Pay is
only but one of the levers.
Source Adopted from H. Risher (Ed.), Aligning
Pay and Results, American Management Association,
1999, p. 15, 303-304.
55
Organizational Innovation A Combined and
Integrated Strategy Works Best
Raising the Bar of Performance (cont) Macys
research shows that the action-levers are more
powerful when used in combination (structure,
human resources, technologies, and total quality)
as the basis for an integrated organizational
transformation strategy. And that is the
direction in which companies are heading. The
changes related to this shift in strategy are
documented in the 1998 State-of-the- Art and
Practice Council Report, a research project
sponsored by the Human Resource Planning Society
that looked at the thinking and practices in
leading companies where human resources
strategies and practices were acknowledged to
provide competitive advantage. The researchers
found that the focus on productivity had shifted
to a broader definition of improved performance
increasing shareholder value. Significantly, the
CEO and COOs contacted for the study mentioned
people as frequently as, if not more so than, the
human resources executives when they outlined
their major business priorities. Those companies
were redesigning their basic organization
architectures to align strategy,
structure,systems, processes, staffing, and
culture to create an organization that is
organized to succeed and that translates into
increased shareholder value. A focal goal of
their efforts was the creation of a high
performance organization (HPO) with an adaptive
culture that encourages leadership, teamwork,
learning,and accountability.
Source Adopted from H. Risher (Ed.), Aligning
Pay and Results, American Management Association,
1999, p. 15, 303-304.
56
75 CURRENT COMMON ACTION LEVERS FROM NORTH
AMERICAN INNOVATION EFFORTS 1991 - 2000
4. TOTAL QUALITY LEADERSHIP (TQL)
ACTION LEVERS
2. HUMAN RESOURCES ACTION-LEVERS
3. TECHNOLOGY ACTION-LEVERS
1. ORGANIZATIONAL CAPACITY ACTION-LEVERS
18. Employee Recognition Systems
32. CAD/CAM
1. MBO (Management by Objectives)
46. TQM Core Values/ Charter Developed
2. Behavior Modification/ Reinforcement
Systems
33. Robotics 34. Non-Computerized Materials
Handling/ Work Flow Processes 35. Flexible
Manufacturing Systems 36. Just-In-Time
Systems 37. Statistical Process Control Systems
(TQM) 38. MIS/Decision Support Systems 39.
Automated Control/Measurement Manufacturing
Systems 40. Computer Network/Electronic Mail 41.
Office Automation/Work Processors 42. Capital
Investment in New Plant, Buildings,
Offices, etc. 43. Computerized Materials
Handling/ Work Flow Processes 44.
Computerization 45. Paperless Office/Factory 45.1
External Benchmarking Deployment
19. Multi-Skill
47. Cost of Quality Monitoring
20. Career Development Systems
48. Formalized Focus on External Customer
3. Structured Feedback from Performance
Appraisal Process
21. Management Development/Education
49. Formalized Focus on Internal Customer
22. General Employee Education Systems
4. Formal Supervisory Feedback System
50. Formal External Customer Partnerships
5. Physical Layout
23. Special Employment Testing
51. Formal Supplier/Vendor Partnerships
6. Human Factors Design
24. Special Selection/Assessment Procedures
52. Formalized Customer Information Shared
and disseminated with employees
7. Multiskill/Common JobClassification
25. Job Enrichment/Enlargement/Task
Variety System
53. Produce for Customer Order (Not for
Inventory)
8. Job Rotation/Cross Training Systems
54. Line Employees inspection of Raw
Materials
Involvement Groups/Committees

26. Team Building/Group Process Training
Forces/Employee
9. Formalized Task
55. Line Employees inspection of Work-in-
Process
27. Work/Manufacturing Cells (Process
Improvement teams)
10. Non-Traditional Work Schedules
56. Line Employees inspection of FINALS
11. Semi-Autonomous Teams
28. Job talks/Open Forums/Monthly
Meetings/Employee Breakfast Meetings
57. SPC/SQC/TQC Training
12. Autonomous Teams
58. Vendor/Supplier delivery of Raw Materials
Just-in-Time
29. Open Information/Communication
Systems
13. Other Hierarchical Changes 13.1 Strategic
Organization Unit (S.B.U.) 13.2 Horizontal
Design (Matrix (i.e. Matrix
Cross-functional Teams) 13.3 Horizontal Design
(Non-matrix - aligned- de-centralized
(i.e., Aligned cross-functional teams)
13.4 Focused Factory, Product Alignment
(Non-matrix decentralized) 13.5 Focused Factory
(Matrix) 13.6 Process/Area Teams 13.7 Other
Restructuring
59. Customer ordering from Finished Goods
Inventory
30. Peer Review/Performance Appraisals 31.
Other Team Configurations (Quality
Improvement Teams, Natural Work Teams,
QCs, HP Teams, etc.) 31.1 External Benchmarking
Deployment
60. Customer Complaints directed to employees
who made product/produced service
Boxed items indicate significant association with
financial improvement
61. ISO 9000 Certification 62. NOA Baldridge
Assessment 63. Policy Deployment 64. Quality
Function Deployment 65. External Benchmarking
Deployment
Adopted From Macy, B.A. Izumi, H.A. (1993)
Organizational Change, Design and Work
Innovation A Meta-Analysis of 131 North American
Field Studies - 1961-1991. In R. Woodman W.
Pasmore (eds.) Research in Organizational Change
and Development JAI Press Inc. Vol 7.
14. Goal Setting/ Stewardship/Measurement
Systems of Performance Indicators
15. Innovative Financial Reward (Pay
Systems)
16. Status Equality (No Perks)
17. All Salaried Workforce 17.1Co-Location of
Aligned Resources 17.2 External Benchmarking
Deployment